Making Waves

I would like to use this post to build on several points from my previous blog and lay out a scenario for the activation of the Distributed Energy Resources (DER) Ecosystem. The model I formed is one of waves. Not necessarily a series of waves, rather waves in parallel with each other activating at different points.

First, allow me to present my definition of Distributed Energy Resources – DERs are connected and controllable edge devices (behind the last utility meter) that can either produce electricity or be commanded to alter consumption of electricity in a predictable manner. In terms of examples, think about solar, lighting, battery energy storage, HVAC, CHP, etc. There is a more exhaustive definition, but this hits the major points.

Now, back to the Waves.

Wave 1: "Assets in the Ground." This wave involves building out of a network of connected distributed energy resources, and it is occurring already today. Distributed solar is more than half of the solar installs based on megawatts (MWs) in the U.S. in 1Q 2016 (see chart below), and distributed energy storage is set to grow faster than utility scale in the coming years (see second chart below). By ensuring connectivity, we can gauge entitlement for the number of controllable assets. Connection should be made to all other potential assets in the facility while connecting to the DERs, i.e., lighting, HVAC, refrigeration, etc. Thousands of MWs of DERs are being installed each year, and tens of thousands of MWs of controllable loads already exist in the installed base. The goal of Wave 1 is to produce locally and gain access to potentially controllable loads that could be monetized for the benefits of consumers and the energy ecosystem.

Wave 2: "Optimize Inside the Fence-line." Here we move from connected to controllable through the use of EMS (Energy Management Systems) or BMS (Building Management Systems) and optimization analytics. The goal of this wave is to reduce and shift loads, meaning we reduce overall energy consumption and shift loads away from peaks. This is where the analytic platforms (like Predix) can become an energy analytics gateway.

Wave 3: "Virtual Power Plant." In Wave 3 we move from controllable to dispatchable. By this, I mean the facility will now be able to aggregate and project its controllable load capabilities back onto the grid. To the utility or distribution system operator it will look like production. This capability could be monetized through traditional grid services, firm capacity, electric energy, operating reserves, etc. We could also see it happen through new services that will emerge due to the location value of DERs.

As I mentioned at the start of this blog, these waves will not occur in series. There are examples of all three waves either being monetized or being piloted across markets today. I hope this post can create a framework for further development on the topic.